Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County No. 00CC14365, John M. Watson, Judge. Affirmed.
Gary E. Shoffner for Plaintiff and Appellant.
Best Best & Krieger, D. Brian Reider, Douglas S. Phillips and Kira L. Klatchko for Defendant and Respondent.
OPINION
O’LEARY, J.
Laurence Grabowski appeals from a judgment in favor of Mustang Motels, Inc., in the action he filed against his brother, Patrick Grabowski, several members of his brother’s family, and several business entities, including Mustang. The appeal concerns only the judgment for Mustang and only one cause of action, for inspection of corporate records and involuntary dissolution of Mustang. The trial court granted Mustang’s motion for judgment (Code Civ. Proc., § 631.8), explaining in its statement of decision Larry was not a shareholder of Mustang as he had transferred all his shares to his brother in 1977. And because Larry was on notice no later than 1981 that he was no longer considered a shareholder, the four-year statute of limitations contained in section 343 barred any causes of action he had against Mustang.
For convenience, we will refer to the Grabowski litigants by their first names. The only plaintiff is appellant, Laurence Grabowski (Larry). The Graboswki defendants in the underlying action are Patrick Grabowski (Patrick), his wife Janis Grabowski (Janis), and several of their children. Mustang Motels, Inc., owned by Patrick’s family, is a defendant in the action and is the respondent in this appeal.
All further statutory references are to the Code of Civil Procedure, unless otherwise indicated.
On appeal, Larry primarily contends the trial court’s statement of decision is insufficient because it does not adequately explain the basis for the finding he was no longer a shareholder of Mustang. He also contends that because he is a Mustang shareholder, the statute of limitations does not bar his right to seek its involuntary dissolution. We find no merit to his contentions and affirm the judgment.
FACTS AND PROCEDURE
Larry and Patrick started buying properties together in the early 1960s when they were teenagers, and they operated many properties and businesses (primarily motels) as joint ventures or partnerships. Patrick, the older brother, handled the business side of their investments. Throughout the years, profits from the various businesses and properties were deposited into a bank account, called in this litigation the “Miscellaneous Account,” managed exclusively by Patrick. The personal expenses of both brothers’ families were paid by Patrick from the Miscellaneous Account. Mustang was one of the corporations in which Patrick and Larry were involved. The record does not disclose why the brothers’ relationship soured, but eventually Larry demanded an accounting of the properties, businesses, corporations, and bank accounts, and this litigation ensued.
Larry’s original complaint was filed on December 24, 1996. The operative complaint is Larry’s second amended complaint filed in 1997 (hereafter, the complaint). The complaint contained 14 causes of action against Patrick, his family members, and business entities including Mustang. The causes of action were largely for accountings as to several business entities, dissolution of joint ventures between the brothers as to those entities, and specific performance of joint venture agreements. The complaint’s 14th cause of action alleged that since 1975, Larry has owned 50 percent of Mustang’s stock. He sought access to the Mustang’s corporate records, dissolution of the corporation, and an accounting of its assets.
In 1999, Mustang obtained summary adjudication in its favor of all causes of action against it except the 14th. The matter was referred by the trial court to Retired Judge Philip E. Schwab, who in 2001 ordered an accounting of three Grabowski business entities (none of which were Mustang). In 2002, Judge Schwab ordered further accountings on several other properties and businesses (again not Mustang). The trial concerning Mustang (and another corporation not relevant to this appeal) took place before Judge Schwab in April 2003.
The documentary evidence included numerous Mustang corporate documents. Mustang was incorporated on December 26, 1975. (The apparent reason was to build and operate a motel.) Patrick and Larry were the only shareholders, each taking 500 shares of stock. The minutes from the first board meeting stated each brother was to pay $100 for each share issued (i.e., $50,000). Two stock certificates were issued on December 26, 1975: Certificate No. 1 to Patrick for 500 shares and Certificate No. 2 to Larry for 500 shares. Mustang’s opening journal entries stated Mustang started business with $100,000 cash from issuance of shares to Patrick and Larry, real property (known as the Coberly Ford property) valued at $150,000 conveyed to Mustang by Patrick and Larry, and a $475,000 construction loan from Mechanics National Bank.
The original Certificate No. 2 was destroyed in May 1977. Minutes from a May 25, 1977, special meeting of Mustang’s board of directors, show Larry, Patrick, and Janis resigning as officers and directors of Mustang, with M.S. Tomlinson (Mustang’s attorney) and Kenneth W. Nydam (another attorney) taking their places. Also on May 25, 1977, several more share certificates were issued. Certificate No. 3 for 1,000 shares of Mustang was issued in Larry’s name alone. The stock certificate book stub for Certificate No. 3, states it represented the shares from the original Certificates Nos. 1 and 2, and those shares were being transferred by Larry and Patrick to Larry. The stub has the word “VOID” written across it. Certificate No. 4 for 500 shares was issued to Patrick’s wife, Janis, stating it was a transfer by Patrick of the shares represented by the original Certificate No. 1. The stock certificate book stub and the certificate have the words “CANCELLED” written across them. Certificate No. 5 for 500 shares was issued in Larry’s name stating it represented the shares from the original Certificate No. 2 (which had been destroyed). Certificate No. 5 was then endorsed by Larry transferring the 500 shares to Patrick. Finally, also on May 25, 1977, Larry signed an option agreement giving Tomlinson an option to purchase 500 shares of Mustang Stock from him for $133,750.
Share Certificate No. 6 for 500 shares is dated March 22, 1979, and states it is a transfer of the Certificate No. 5 shares from Larry to Patrick. Both the certificate and the stock certificate book stub have the words “CANCELLED” written across them.
At some point after the May 25, 1977, meeting, Larry, Patrick, and other Grabowski family members went back onto the Mustang board of directors and Larry continued to serve on the board of directors of Mustang for several more years. Minutes from the 1980 annual shareholders meeting were signed by Larry, Patrick, and Janis as shareholders. But thereafter, Larry signed numerous corporate documents omitting his name as a shareholder. In 1981, 1982, 1983, 1984, and 1985, Larry signed the minutes from the Mustang annual shareholders meetings. Each of those minutes recite that the signers of the minutes constitute all the Mustang shareholders, and each set of minutes is signed by Patrick, Janis, and their adult children, and are signed by Larry acting as custodian for Patrick’s minor children under the California Uniform Gifts to Minors Act. In August 1985, Larry signed a stock purchase agreement concerning future transfers of Mustang stock. The agreement recited that there were 1,000 shares of Mustang stock outstanding and all the shares were owned by Patrick, Janis, and their children. Larry signed the agreement as custodian for one of his nephews. On November 9, 1992, Larry ceased being an officer or director of Mustang.
In an earlier stage of this litigation, Patrick testified Larry did not contribute any capital to Mustang, all contributions came from Patrick alone and he was the 100 percent owner of Mustang. (Patrick did not dispute that Larry was a part owner of many other ventures.) At the time Mustang was being incorporated, Patrick was on the board of directors and on the real estate lending committee of Mechanics National Bank. He had obtained approval for a motel construction loan from the bank, but bank regulators would not permit the loan unless Patrick reduced his ownership in the project to 50 percent. Therefore, Patrick arranged for Larry to receive 50 percent of the Mustang stock in exchange for a note from Larry for about $133,000. The intention was not to convey to Larry a one-half interest in Mustang; it was to comply with bank regulations to obtain the loan. To guard against the possibility that one day Larry might not be willing to give the Mustang shares back to Patrick, the deal included Larry giving Patrick’s attorney, Tomlinson, an option to repurchase the shares for $133,000.
In the current phase of trial, Patrick testified that in December 1975, he and Larry were each issued 500 shares of Mustang stock. The stock certificate book stub from Certificate No. 1 said it had been cancelled, although the stock certificate book stub for Certificate No. 2 did not. Patrick believed both Certificates Nos. 1 and 2 had been shredded. Share Certificate No. 3 (replacing Certificates Nos. 1 and 2; 1,000 shares to Larry) was filled out by Tomlinson, but then “instantly redone.” Patrick believed Certificate No. 3 was also shredded.
There was also some testimony from Patrick indicating the Coberly Ford property (listed as an asset on Mustang’s opening books) was purchased in part with the proceeds of the sale of another property called the Yamaguchi Property. Additionally, Patrick testified some expenses relating to the Coberly Ford property (some fees and demolition costs) incurred before Mustang was incorporated were paid from the Miscellaneous Account.
At the close of Larry’s case, the court granted Mustang’s motion for judgment. Larry filed a request for a statement of decision containing 29 specific questions he wanted the court to answer. The questions were grouped into six areas: (1) questions concerning what the current records of Mustang showed as to the outstanding shares; (2) questions concerning the issuance of the original share certificates and the source of initial capitalization for Mustang; (3) questions concerning the issuance of Certificate No. 3; (4) questions concerning the effect of the endorsement and delivery of Certificate No. 5 by Larry to Patrick; (5) questions about the accuracy and reliability of Mustang’s records; and (6) questions about when the statute of limitation commenced.
In the proposed statement of decision (prepared by Mustang’s counsel), the court made 15 findings of fact. Mustang was incorporated in 1975 and Certificate No. 2 for 500 shares was issued to Larry. The original Certificate No. 2 was destroyed in May 1977. Certificate No. 3 (1000 shares) was issued to replace Certificate Nos. 1 and 2, but then voided and destroyed. Certificate Nos. 4 and 5 were issued to replace Certificate No. 3, giving 500 shares to Janis and 500 shares to Larry. Certificate No. 5 was then endorsed by Larry, transferring his 500 shares to Patrick. Certificate No. 5 was cancelled, and Certificate No. 6 issued to Patrick for 500 shares. As of May 25, 1979, the only shareholders of Mustang were Janis (via Certificate No. 4) and Patrick (via Certificate No. 6). After May 25, 1979, there were multiple transfers of Janis’s and Patrick’s shares to their children. Some of those shares were transferred to Larry as custodian for those children, for the children’s benefit. Larry did not own any shares himself after that time. Beginning in 1981, Larry signed documents on several occasions reciting that the shareholders named in those documents comprised all the Mustang shareholders. Larry was not a named individual shareholder. He held shares only as custodian for Patrick’s minor children. Larry knew he was signing documents only in a representative capacity. Larry knew by no later than November 20, 1981, “that Mustang did not regard him as an individual shareholder of the corporation.” Larry ceased being a director of Mustang on November 9, 1992.
The statement of decision contained the following conclusions of law. Larry sought dissolution of Mustang under Corporations Code section 1800. A four-year statute of limitations applied to his cause of action under section 343. Certificate No. 5 was a certificated security and by endorsing and delivering the certificate to Patrick, Larry transferred legal title to his interest in Mustang and ceased having any individual ownership. Thereafter, Larry held title only as a trustee for Patrick’s minor children. There was no fiduciary relationship between Patrick and Larry with respect to Mustang shares. Had such a relationship existed, Larry was on notice beginning in 1981, due to the many documents he signed stating he was not a shareholder, that he was not an owner. Larry had a duty to inquire as to the ownership status of the corporation commencing in 1981, and his claims were now barred by the four-year statue of limitations.
Larry filed objections to Mustang’s proposed statement of decision. The court overruled the objections and signed Mustang’s proposed statement of decision. Subsequently, the court (Judge John M. Watson) entered judgment for Mustang.
DISCUSSION
Larry contends the statement of decision is inadequate because it failed to sufficiently explain the legal and factual basis for the court’s ruling. We disagree.
“In rendering a statement of decision under . . . section 632, a trial court is required only to state ultimate rather than evidentiary facts; only when it fails to make findings on a material issue which would fairly disclose the trial court’s determination would reversible error result. [Citations.] Even then, if the judgment is otherwise supported, the omission to make such findings is harmless error unless the evidence is sufficient to sustain a finding in the complaining party’s favor which would have the effect of countervailing or destroying other findings. [Citation.] A failure to find on an immaterial issue is not error. [Citations.] The trial court need not discuss each question listed in a party’s request; all that is required is an explanation of the factual and legal basis of the court’s decision regarding the principal controverted issues at trial as are listed in the request. [Citation.]” (Hellman v. La Cumbre Golf & Country Club (1992) 6 Cal.App.4th 1224, 1230.)
“Since the trial court must find only the ultimate facts necessary to support the judgment upon the essential issues which are presented by the pleadings [citation], our task is limited to a determination whether the facts found by the trial court are adequate to adjudicate the essential elements of the challenged causes of action.” (Division of Labor Law Enforcement v. Transpacific Transportation Co. (1977) 69 Cal.App.3d 268, 274.)
Larry’s 14th cause of action against Mustang sought two things: the involuntary dissolution of the corporation and access to inspect the corporate records. To obtain either, Larry had to prove he was a shareholder or a director of the corporation. (See Corp. Code, §§ 1600, 1601, 1602, 1800.) In its statement of decision, the trial court found that as of 1992, Larry was not a director of Mustang. It further found that as of May 25, 1977, when Larry endorsed Certificate No. 5 transferring his 500 shares to Patrick, he ceased being a shareholder. That Larry was neither a shareholder nor a director of Mustang are the ultimate facts necessary to support a judgment for Mustang on the 14th cause of action.
Larry complains the court failed to adequately explain why he was no longer a shareholder because it did not explain why Certificate No. 2 (the original 500 shares to Larry), and Certificate No. 3 (all 1,000 shares to Larry), were not being given effect. But, the court’s statement of decision explained: Certificate No. 2 was destroyed; Certificate No. 3 was initially prepared to replace Certificate Nos. 1 and 2, but then it was voided and destroyed; Certificate Nos. 4 and 5 were then issued to Janis and Larry, respectively, replacing Certificate No. 3; and then Larry endorsed Certificate No. 5 to Patrick, transferring the shares to him. The trial court was not “constrained to provide a statement of decision addressing every single one of [Larry’s 29] questions. [Citation.]” (In re Marriage of Balcof (2006) 141 Cal.App.4th 1509, 1530.)
Larry also complains the court did not resolve issues about the original source of capital for Mustang. But, the only ultimate material fact is that in 1977 Larry transferred all his shares to Patrick. Whether two years earlier Larry had actually given anything of value for those shares was immaterial.
We are satisfied the statement of decision adequately set forth findings on the ultimate facts necessary to support a judgment: Larry was neither a shareholder nor a director and, therefore, had not established the requisites for involuntary dissolution or access to corporate records. Larry complains the statement of decision did not specifically articulate this as a legal reason for ruling in Mustang’s favor. We disagree. The court’s “conclusions of law” included that Larry was seeking involuntary dissolution under of the corporation under Corporations Code section 1800 and by endorsing Certificate No. 5 to Patrick, Larry ceased to have any individual ownership of Mustang. We can easily connect the dots between the two. And in any event, “it is well-established that we may uphold a judgment on a theory other than those relied upon by the trial court. [Citation.] Moreover, factual findings in the statement of decision could furnish a basis for affirmance, whether the legal standard was articulated correctly or not.” (Howard S. Wright Construction Co. v. BBIC Investors, LLC (2006) 136 Cal.App.4th 228, 240.)
2. Statute of Limitations
Larry separately assails the court’s findings on Mustang’s statute of limitations defense. Larry argues the issue (and findings) are a “red herring.” If Larry is a shareholder, then there can be no statute of limitations defense raised; conversely, he asserts, if he is not a shareholder “Mustang wins the case without the aid of the statute of limitations.” We agree with Larry’s latter point, i.e., since he is not a shareholder, he cannot establish the requisites for involuntary dissolution, regardless of the statute of limitations.
The statute of limitations defense raised by Mustang appears directed at whether Larry knowingly parted with his Mustang shares and whether Mustang breached a fiduciary duty to Larry. In Schneider v. Union Oil Co. (1970) 6 Cal.App.3d 987, the plaintiff and her father owned corporate stock as joint tenants with right of survivorship. When her father died, the plaintiff discovered that 14 years earlier, he had forged her name on the stock certificates, transferred them to a third party, and the plaintiff’s name had been removed from the corporation’s share register. The plaintiff sued the corporation to establish her status as a stockholder. Noting that “[the p]laintiff’s cause of action is based on [the corporation’s] breach of its fiduciary duty to recognize her rights and status as one of its shareholders[,]” the court concluded the four-year statute of limitations (§ 343) applied to her claim, but the plaintiff’s cause of action did not arise “until [s]he had notice of some unequivocal act that [her] rights were being disputed.” (Id. at pp. 993-994.)
Here, Larry specifically requested the statement of decision address Mustang’s statute of limitation defense and fiduciary status. In the statement of decision, the court concluded if Mustang was a fiduciary, Larry was put on notice no later than 1981 that he was no longer considered to be a shareholder when he began signing documents indicating he was not a shareholder. Accordingly, any claim against Mustang to establish his ownership of the shares was barred by the four-year statute of limitations. Although the court’s findings may have been unnecessary, that does not render the statement of decision defective.
DISPOSITION
The judgment is affirmed. The Respondent is awarded its costs on appeal.
WE CONCUR: BEDSWORTH, ACTING P. J., ARONSON, J.